Cancelling or Dissolving Your Business Entity
Parties often wait until a dispute arises to exercise or learn about their rights. However, it is often more prudent to know and exercise rights before a dispute arises. The main shareholder or partnership rights include limited “economic” rights, voting rights, inspection rights, the right to bring a derivative action, and, in certain circumstances, the right to start the dissolution process.
Business entities can dissolve or cancel their businesses at almost any time. In particular, California corporations “dissolve,” while limited liability companies and partnerships “cancel.” Dissolution or cancellation are options for businesses that wish to cease operations in California and need to terminate their legal existence in the state. In some instances of partner withdrawal from a partnership, cancellation or dissolution will be automatic.
The process for cancelling or dissolving a business entity will depend on the applicable state laws and the terms of the corporate or partnership agreement. For example, some partnership agreements may contain a provision stating that the death of a partner, or the withdrawal of a partner, will lead to automatic cancellation of the partnership. This is merely a term that parties agree to at formation and not one that is required by the state.
More specifically, in a limited partnership, a general partner may withdraw at any time by giving written notice to the other partners. The general partner’s withdrawal from a limited partnership will terminate his or her or its status as a general partner, and the certificate of limited partnership (filed with the Secretary of State) must be amended. The same is true if a new general partner is admitted.
A limited partner, on the other hand, must give at least six months written notice to each general partner of his or her desire to withdraw. A partnership agreement can change this requirement, permitting for less or more notice.
Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business and commercial claims. Contact us at (310) 277-7747 to see how we can help you with your business needs.